As the saying goes, in the world of multinationals, the only thing that is constant is change. And market changes can be tracked most quickly by a well-structured shared service centre. Why is that? What is a shared service centre? Why is it different from traditional accounting? What are the benefits and challenges? And for whom is it worthwhile starting a shared service centre anyway? These are the questions we seek answers to in our article.
What is a shared service centre?
A shared service centre (SSC) is a business solution designed to manage financial processes, which provides services in an efficient and properly controlled environment, usually to peer entities within a group, but also to external clients, based on a standardised operating framework.
Why does this differ from traditional accounting?
Compared to traditional accounting, where a single person or a small team is usually responsible for an entire process, in this model a given task is broken down into much smaller sub-processes. In the case of a larger shared service centre, these subtasks are not performed by a single person, but by an entire department. The permissions required for tasks can also be tailored to the processes, which helps to prevent people committing mistakes that are difficult or impossible to rectify later on. Of course, with processes where a particular group is only responsible for a certain part, and they can only intervene during a certain phase, this can often slow business down. However, the work is conducted in a controlled environment, which is welcomed from the perspective of ownership, management or even the external/internal auditor.
The financial industry has been radically transformed over the past 15 years, wittingly and unwittingly, and with the rise of artificial intelligence, the next 15 years are likely to bring many changes too. It suffices just to think that not so long ago, one single senior accountant or chief accountant was responsible for all the accounting, payroll and tax advice, but today, all these areas are now grouped into separate professions. In fact, a shared service centre does nothing more than break down and consolidate these main groupings and professional areas, and then shapes them into a more efficient bulk processing system.
What goes on inside a shared service centre?
Typically, a shared service centre is not responsible for all the financial processes of a company or group of companies, only for a specific part. This area is usually the part of the financial processes that can be automated and controlled the most, with the least amount of exception handling. Accounting SSCs first divide the processes into three main groups based on the definition of responsibilities:
- P2P – Purchase to Pay (purchase and approval processes from invoice booking to payment)
- O2C – Order to Cash (sales order processing, from invoicing to customer payment processing, accounts receivable management).
- R2R – Record to Report (includes financial closing and reporting processes)
Having proper documentation is a prerequisite for a standardised operating framework. A well-documented shared service centre can drastically reduce the time-consuming transfer of knowledge due to staff turnover or simply growth (and thus save significant costs), since all processes are documented step by step. This means that new colleagues have nothing else to do during onboarding than review these documents and add any changes. In the world of out-of-office work, more and more video material is now being produced to complement written documentation, where you can search for keywords to see exactly what steps a task consists of. This documentation is time-consuming, but an essential part of stability and efficiency.
The future and digitalisation
The future of SSCs is largely shaped by digitalisation and the integration of new technologies into daily processes. SSCs are already leading the way in automation, but in the coming years they will play an even more dominant role in integrating artificial intelligence and machine learning into business processes. These tools not only increase work efficiency, but also help to improve the quality of processes.
Artificial intelligence for example, allows the system to automatically detect and correct recurring errors, or even predict potential problems in advance. This increasingly reduces the need for manual intervention in accounting processes, and therefore allows staff to focus on higher value-added tasks.
Based on all this, who could benefit from launching a shared service centre?
We recommend starting a shared service centre to all medium and large companies where decision-makers dare to step out of the “traditional” way of working in the good sense of the word and want to reap the benefits outlined above.
Operating shared service centres, or SSC activity, is one of the strongest pillars of WTS Klient’s financial management business line, and one of the largest areas of our outsourcing service. If you think that your company should consider launching a shared service centre, please contact our experienced specialists.
